Question 1

Describe each of the investigations of the accounting profession during the 1970s and 1980s. Given the passage of the Sarbanes-Oxley Act in 2002, do you think these investigations helped to pave the way for SOX improvements?

Accepted Answer

During the 1970s and 1980s, the accounti...

Question 2

Statement on Standards for Tax Services No. 1 establishes as a basic principle of providing tax services that the CPA:

Accepted Answer

A)   Must have a good faith belief that the tax return position can be justified if challenged
B)   Must have a good faith belief that the information provided by the client is accurate
C)   Can never recommend a tax position to the client when it is frivolous
D)   All of theseE) None of the above
F) B) and D)

Question 3

The SEC's position on independence can best be characterized as:

Accepted Answer

A)   Proscribing certain financial interests with the client
B)   Proscribing certain business relationships with the client
C)   Restricting the provision of certain nonaudit services to audit clients
D)   All of theseE) None of the above
F) A) and B)

Question 4

In which of the following is a CPA independent in fact and appearance?

Accepted Answer

A)   The CPA's brother is the controller of the company being audited.
B)   The CPA serves on the board of a non-profit with the CFO of the company being audited.
C)   The CPA borrowed money for a new car from the CEO of the company being audited.
D)   The CPA owes an office building that he leases to the client.E) A) and C)
F) None of the above

Question 5

A young man by the name of Mr. Hicks works at an accounting firm which has a written ethics code of conduct. The code specifically outlines the duties and obligations that every employee must follow without question. One of rules states that every accountant should not lie under any circumstances.
Last week Mr. Hicks sent out a finalized tax return to the Wrong client. The Wrong client called Mr. Hicks and informed him that he was sending the tax return back to him overnight. Meanwhile the Right client called Mr. Hicks and wanted to know where the tax return was. Mr. Hicks told the Right client that he sent it to the wrong address and he will send out the return the next day. The Right client was irritated and called the partner of the firm.
The partner scolded Mr. Hicks and wanted to know why he told the client he sent the return to the wrong address. The partner said he should have told the client that the return was in the 2nd partner review or some other excuse to cover up the mistake. Mr. Hicks explained that the ethics code of conduct specifically states that he should not lie under any circumstances and he was just following his ethical duty. The partner grinned and told Mr. Hicks that the next time this happens, he should consult with the partner first.
Using the ethical decision making model and ethical theories, justify the positions of either the partner, Mr. Hicks or an alternative solution.

Accepted Answer

Hicks has attempted to be honest with th...

Question 6

The due care principle in the AICPA code:

Accepted Answer

A)   Addresses the quality of the individual who performs professional services
B)   Addresses the quality of services performed by the CPA
C)   Addresses whether the independence standards has been met
D)   All of theseE) A) and C)
F) None of the above

Question 7

To whom does the CPA owe ultimate allegiance in carrying out professional obligations?

Accepted Answer

A)   Stockholders
B)   Public interest
C)   Client
D)   StakeholdersE) B) and C)
F) C) and D)

Question 8

Which of the following would be an example of due care?

Accepted Answer

A)   Audit documentation only supplied by the client.
B)   Audit documentation is a copy of last year's workpapers.
C)   Audit documentation obtained by the auditor with reviews by supervisory personnel.
D)   Audit documentation with misapplication of GAAP.E) B) and C)
F) A) and D)

Question 9

Which of the following situations of a CPA's distant relatives does not impair the CPA's independence?

Accepted Answer

A)   CPA's parent holds a key position with an audit client.
B)   CPA's nephew is starting as a salesperson with an audit client.
C)   CPA's dependent roommate owns a material interest, and sits on the board, of an audit client.
D)   CPA's sister is chief counsel for an audit client.E) B) and D)
F) None of the above B

Question 10

Sarah is an audit senior with Childs, Maxwell and Weaver, LLP. Sarah specializes in auditing loan loss reserve for financial institution clients. This current year she has noticed that two of her financial institution clients in town have written loans off to a loan customer, Mr. T (fictional name to protect the guilty). Mr. T is well known in town as a highly successful real estate developer and businessman with many different business dealings. As Sarah is auditing her third financial institution client in town, she notices that the bank has loans of $3.5 million outstanding to Mr. T. The current loan loss reserve could not cover the losses on Mr. T's loans. Sarah has recommended a significant increase to the loan loss reserve account. The client will not discuss increasing the loan loss reserve. Ms. Childs, senior partner on the audit, wants to know how the audit firm can justify the increase loan loss reserve account. What can and should Sarah disclose about Mr. T?

Accepted Answer

This short case is about confidentiality...

Question 11

Under the Sarbanes-Oxley Act, the auditor's responsibility with respect to internal controls can best be stated as:

Accepted Answer

A)   Develop a system of internal controls that helps to prevent and detect fraud
B)   Assess whether the internal controls helps to prevent and detect fraud
C)   Assess management's report on internal controls
D)   All of theseE) All of the above
F) A) and B)

Question 12

In the ESM fraud discussed in this chapter, Jose Gomez violated the Independence standard because he:

Accepted Answer

A)   Had loans outstanding from the client
B)   Engaged in a business relationship with the client
C)   Had family members who owned stock directly in the client
D)   All of theseE) A) and B)
F) C) and D)

Question 13

Which tax service is still permitted by the PCAOB for audit clients following the KPMG tax shelter case?

Accepted Answer

A)   Aggressive tax shelter for audit clients
B)   Auditing of deferred taxes
C)   Tax services to audit client management or family members
D)   Tax services for a contingent feeE) A) and B)
F) A) and C)

Question 14

In the Lincoln Savings & Loan failure during the period of failures at savings and loan institutions, Lincoln was charged with:

Accepted Answer

A)   Stealing $300 million from shareholders
B)   Causing retirees to lose their life savings
C)   Causing employees to lose their jobs
D)   Engaging in a Ponzi schemeE) A) and C)
F) All of the above B

Question 15

Which of the following immediate family members or close relatives would not have to follow the independence rules that apply to the CPA according to Interpretation 101-1?

Accepted Answer

A)   CPA's spouse
B)   CPA's spousal equivalent
C)   CPA's uncle
D)   CPA's dependentsE) A) and D)
F) A) and B)

Question 16

Circular 230 applies to CPAs who:

Accepted Answer

A)   Audit the financial statements of a tax client
B)   Practice before the IRS
C)   Practice before the SEC
D)   All of theseE) B) and C)
F) A) and C)

Question 17

The cost to the public to clean up 1,043 failed savings and loan institutions during the period of 1986-1995 was:

Accepted Answer

A)   $152.9 billion including $123.8 billion of U.S. taxpayer losses
B)   $300 million including $123.8 million of U.S. taxpayer losses
C)   $400 billion including $152.9 billion of U.S. taxpayer losses
D)   $400 million including $152.9 billion of U.S. taxpayer lossesE) All of the above
F) A) and D)

Question 18

The PCAOB rules prohibit auditors from:

Accepted Answer

A)   Providing certain aggressive tax shelters to their public company audit clients
B)   Providing tax services to members of the audit client's management who serve in financial reporting oversight roles
C)   Providing tax preparation and planning services for public company executives
D)   All of theseE) A) and B)
F) C) and D)

Question 19

Impairments of independence can occur when:

Accepted Answer

A)   A CPA owns a direct financial interest in a client
B)   A CPA owns a material indirect financial interest in a client
C)   Immediate family members of the CPA are in violation of the independence rules
D)   All of theseE) B) and D)
F) C) and D) D

Question 20

The revenue recognition issue in the Family Games case is:

Accepted Answer

A)   Whether a company can record revenue before it is signed-off by the lawyers
B)   Whether a company can record revenue before it is shipped to the customer
C)   Whether a company can record revenue before the revenue recognition rules are met
D)   All of theseE) B) and D)
F) A) and D)

Exam 4: Aicpa Code of Professional Conduct

Describe each of the investigations of the accounting profession during the 1970s and 1980s. Given the passage of the Sarbanes-Oxley Act in 2002, do you think these investigations helped to pave the way for SOX improvements?

Correct Answer
Answered by ExamLex AI
During the 1970s and 1980s, the accounti...
View Answer

Statement on Standards for Tax Services No. 1 establishes as a basic principle of providing tax services that the CPA:

Correct Answer
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The SEC's position on independence can best be characterized as:

Correct Answer
verified

In which of the following is a CPA independent in fact and appearance?

Correct Answer
verified

Correct Answer
verified
Hicks has attempted to be honest with th...
View Answer

The due care principle in the AICPA code:

Correct Answer
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To whom does the CPA owe ultimate allegiance in carrying out professional obligations?

Correct Answer
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Which of the following would be an example of due care?

Correct Answer
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Which of the following situations of a CPA's distant relatives does not impair the CPA's independence?

Correct Answer
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B

Correct Answer
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This short case is about confidentiality...
View Answer

Under the Sarbanes-Oxley Act, the auditor's responsibility with respect to internal controls can best be stated as:

Correct Answer
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In the ESM fraud discussed in this chapter, Jose Gomez violated the Independence standard because he:

Correct Answer
verified

Which tax service is still permitted by the PCAOB for audit clients following the KPMG tax shelter case?

Correct Answer
verified

In the Lincoln Savings & Loan failure during the period of failures at savings and loan institutions, Lincoln was charged with:

Correct Answer
verified
B

Which of the following immediate family members or close relatives would not have to follow the independence rules that apply to the CPA according to Interpretation 101-1?

Correct Answer
verified

Circular 230 applies to CPAs who:

Correct Answer
verified

The cost to the public to clean up 1,043 failed savings and loan institutions during the period of 1986-1995 was:

Correct Answer
verified

The PCAOB rules prohibit auditors from:

Correct Answer
verified

Impairments of independence can occur when:

Correct Answer
verified
D

The revenue recognition issue in the Family Games case is:

Correct Answer
verified

Exam 4: Aicpa Code of Professional Conduct

Describe each of the investigations of the accounting profession during the 1970s and 1980s. Given the passage of the Sarbanes-Oxley Act in 2002, do you think these investigations helped to pave the way for SOX improvements?

Correct AnswerAnswered by ExamLex AIDuring the 1970s and 1980s, the accounti...View AnswerShow Answer

Statement on Standards for Tax Services No. 1 establishes as a basic principle of providing tax services that the CPA:

Correct AnswerverifiedShow Answer

The SEC's position on independence can best be characterized as:

Correct AnswerverifiedShow Answer

In which of the following is a CPA independent in fact and appearance?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedHicks has attempted to be honest with th...View AnswerShow Answer

The due care principle in the AICPA code:

Correct AnswerverifiedShow Answer

To whom does the CPA owe ultimate allegiance in carrying out professional obligations?

Correct AnswerverifiedShow Answer

Which of the following would be an example of due care?

Correct AnswerverifiedShow Answer

Which of the following situations of a CPA's distant relatives does not impair the CPA's independence?

Correct AnswerverifiedB

Correct AnswerverifiedThis short case is about confidentiality...View AnswerShow Answer

Under the Sarbanes-Oxley Act, the auditor's responsibility with respect to internal controls can best be stated as:

Correct AnswerverifiedShow Answer

In the ESM fraud discussed in this chapter, Jose Gomez violated the Independence standard because he:

Correct AnswerverifiedShow Answer

Which tax service is still permitted by the PCAOB for audit clients following the KPMG tax shelter case?

Correct AnswerverifiedShow Answer

In the Lincoln Savings & Loan failure during the period of failures at savings and loan institutions, Lincoln was charged with:

Correct AnswerverifiedB

Which of the following immediate family members or close relatives would not have to follow the independence rules that apply to the CPA according to Interpretation 101-1?

Correct AnswerverifiedShow Answer

Circular 230 applies to CPAs who:

Correct AnswerverifiedShow Answer

The cost to the public to clean up 1,043 failed savings and loan institutions during the period of 1986-1995 was:

Correct AnswerverifiedShow Answer

The PCAOB rules prohibit auditors from:

Correct AnswerverifiedShow Answer

Impairments of independence can occur when:

Correct AnswerverifiedD

The revenue recognition issue in the Family Games case is:

Correct AnswerverifiedShow Answer

Correct Answer
Answered by ExamLex AI
During the 1970s and 1980s, the accounti...
View Answer

Correct Answer
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Correct Answer
verified

Correct Answer
verified

Correct Answer
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Hicks has attempted to be honest with th...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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B

Correct Answer
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This short case is about confidentiality...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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B

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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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D

Correct Answer
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